If you’re buying or selling a property in Canada you can opt to go it alone, or you can seek out the advice and insight of a professional real estate agent. Since most people opt to work with an agent, it’s important to figure out how to find a real estate agent in Canada, if you don’t live in the city, province (or even country) you’re buying in.
While there are a variety of ways to find an a real estate agent in Canada (see our tips in “Finding a real estate agent in a new country“), one quick and effective way is to get a referral from a Realtor you trust in your own hometown.
In Canada, there aren’t many regulations when it comes to agent-referrals, but that doesn’t mean there aren’t a few important ones.
According to both the Real Estate Council of British Columbia (RECBC) and the Real Estate Council of Ontario (RECO), there is a standard for how to treat a referral, but that standard changes depending on your past and current relationship with the real estate agents involved.
Previous history with the referring agent
If you have previously bought or sold property using the real estate agent that is referring you, then your referring agent must disclose whether or not they will get a commission from this referral.
Never bought or sold with the referring agent
But if you end up asking a real estate agent for a referral but you’ve never bought or sold with the person you are asking, then that agent does not have to disclose whether or not they’ll get a referral fee, although they may choose to.
Use referrals to your advantage
All this ‘if-and-when’ business makes it sound like getting a referral fee is illegal, immoral or unethical. It’s none of the above.
In fact, a referral fee is a great way to vet the qualifications of an agent you’ve never met. Why? Because in referral situations, the incentive for the referring real estate agent is to send you to a Realtor that will provide excellent and ethical customer service. If the agent you ask for a referral doesn’t send you to this type of agent then you might not complete a transaction and neither agent gets paid and both agents get painted with a bad brush. “When a Realtor refers another Realtor, their pool of candidates is large, which means the person they refer you to is the best, in their eyes,” explains Ken Eddy, a Calgary-based real estate agent.
“The typical commision fee for referrals in Canada is 25%,” explains Eddy. It might sound crazy, but this rather large cut of the commission made on the purchase of a house is a great financial incentive for both agents. Consider it an assurance that the agent who is being referred is honouring the reputation and professionalism of the agent that provides the referral.
Eddy knows the importance of referrals first hand. The Calgary Realtor receives about 20 client referrals and provides around eight agent-referrals — every calendar year. As a referring agent for Canadian Realtors, he makes sure the people he sends his clients to are reputable, professional and ethical agents who are in the business of listening and helping clients. If he were to ease up on his standards, Eddy’s referral income would dry up quite quickly, as news spread of the poor service offered by the referred agents.
Know the rules
Commission fees paid to those referring clients are perfectly legal. However, the agents must disclose the compensation details to their client before any transactions are complete.
While, it’s expected that agents should disclose the referral relationship (and fees paid) as soon as possible don’t be surprised if you hear about it, and sign off on it until you are finalizing the purchase of a property. Agents like to be sure that a transaction will occur before making their client fill out any paperwork. Don’t be afraid to ask your agent whether or not they will receive a referral fee. Transparency is key to ensuring everyone’s best interests are kept in mind.